Good Times, Bad Times: Postwar Labor's Share of National Income in Capitalist Democracies

This article returns to a classic question of political economy: the zero-sum conflict between capital and labor over the division of the national income pie. A detailed description of labor's share of national income in 16 industrialized democracies from 1960 to 2005 uncovers two long-term trends: an increase in labor's share in the aftermath of World War II, followed by a decrease since the early 1980s. I argue that the working class's relative bargaining power explains the dynamics of labor's share, and I model inter- and intra-class bargaining power in the economic, political, and global spheres. Time-series cross-section equations predicting the short- and long-term determinants of labor's share support most of my theoretical arguments and the main findings are robust to alternative specifications. Results suggest that the common trend in the dynamics of labor's share of national income is largely explained by indicators for working-class organizational power in the economic (i.e., unionization and strike activity) and political (i.e., government civilian spending) spheres, working-class structural power in the global sphere (i.e., southern imports and foreign direct investments), and indirectly by an indicator for working-class integration in the intra-class sphere (i.e., bargaining centralization).